Housebuilder Barratt Developments was the biggest faller in the FTSE 100 yesterday, with shares dropping 9.4p (or 2.6 per cent) to 354.2p. It was followed closely by rival Persimmon, down 2.3 per cent to 1246p.

The sell-off was sparked by figures which suggested that the housing market may be cooling down.

UK house prices fell 0.8 per cent month on month in July for the first time this year, according to UK property website Rightmove.

Separate
figures from the National Association of Estate Agents showed a sharp
drop in first time buyers in June compared to May. This suggests that
stricter affordability tests introduced in April are starting to take
effect. Analysts at Accendo Markets reckon investors are reacting to
stricter lending rules announced by the Bank of England last month, plus
increased concerns that an interest rate hike could come sooner than
expected after the recent sharp rise in inflation and further
improvements in unemployment.

It is feared that this could put the dream of home-ownership out of reach for many, while also hitting housebuilders’ profits.

A
party celebrating outgoing Tesco boss Philip Clarke’s 40th anniversary
at the supermarket giant – due to be held tonight – has been cancelled.

But
investors celebrated the news that under fire Clarke is checking out,
with shares up 3.65p to 288.65p. Even a profits warning failed to dampen
the mood, amid hopes that new boss David Lewis, the Unilever veteran,
will be able to turn around performance when he takes the helm in
October.

As
well as being the second biggest riser in the FTSE 100, Tesco was the
second biggest traded stock – after perennial top dog Lloyds (down 0.83p
to 72.59p) – with 36.15m shares trading hands.But shares dipped at Morrisons (down 4.3p to 173.7p), and fell 6.4p to 318.3p at Sainsbury’s.

Presumably
the view in the market is that a reinvigorated Tesco could claw back
customers from its rivals. The same logic did not apply to Marks &
Spencer, where shares edged up 3.4p to 439.1p.

Some
analysts remain nervous about Tesco ramping up a price war with
discounters such as Aldi and Lidl which have proved so successful at
taking its customers in recent times. Chris White, head of UK equities
at Premier Asset Management, said: ‘There is a body of opinion in the
City suggesting that Tesco should start a price war to squeeze its
competitors. However, it is not obvious that directly taking on the
discounters in a race to the bottom on price is the best way to serve
its customer base and protect its market position.’

Mexico’s
gold and silver miner Fresnillo led the charge in the FTSE 100, up
14.5p to 915.5p. Gold is viewed by investors as a safe haven in times of
crisis, pushing gold prices up. This means that the violence in the
Ukraine and political fall-out from the downed Malaysian Airlines flight
MH17 has boosted the miners.

Chilean miner Antofagasta (up 10p to 815.5p) and Randgold Resources (up 40p to 5105p) also made the top ten biggest risers.

But the spectre of the Ukrainian crisis has proved a drag on the FTSE, which closed 21.01 points down at 6,728.44.

Tobacco
stocks Imperial Tobacco (down 40p to 2647p) and British American
Tobacco (down 32p to 3500p) coughed and spluttered after US rival RJ
Reynolds was hit with a $23.6bn fine imposed by a Florida jury over the
weekend. A widow sued America’s second biggest cigarette maker in 2008
over the death of her husband from lung cancer in 1996, claiming the
company conspired to conceal the health dangers and addictive nature of
its cigarettes, which include Camel and Winston. Markets believe
Reynolds will have to pay a fraction of the fine. But experts are
nervous that the legal case could lead to class actions against tobacco
firms.

Lee
Mumford, a trader from Spreadex, said: ‘Investors are concerned that if
this verdict does not get quashed when it goes to appeal, then this
could have severe implications for the entire industry.’The fine
comes after Reynolds – 42 per cent owned by British American Tobacco –
announced its $25bn planned takeover of US cigarettes giant Lorillard
last week.

British
engineering contractor Babcock’s bulging order book impressed the
market, sending shares up 8p to 1108p. A key supplier to the UK Ministry
of Defence, it said its order book has risen 17 per cent to £13.5bn
since April 1.

The increase included £2bn from its purchase of helicopter company Avincis, which was completed in May.

But
the boost was tempered by news that its bid pipeline fell to £16bn,
compared with £17.5bn at the end of March, following its unsuccessful
bid last month to win government contracts to maintain and develop
defence property.

Tanzania-focused
gold miner Shanta Gold announced record production for the second
quarter at 21,940 ounces, said it was on track to hit its production
target for the year and that it has managed to further cut costs. Shares
jumped 2.7 per cent or 0.38p to 14.25p.